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Cramer To Cannabis Investors: Be Cautious With 'Promotional' Executives

Jayson Derrick

As is the case in any industry, some companies are simply better than others. This logic holds true in the cannabis space, where only some companies boast ample capital and are backed by a strong management team, CNBC's Jim Cramer said during his daily "Mad Money" show Thursday.

Other companies have simply become "too promotional for my taste," he said. 

What Happened

Shares of Tilray Inc (NASDAQ: TLRY) briefly soared from $100 to $300 per share ahead of recreational legalization in Canada, Cramer said. Since then, the stock has drifted lower below the $50 per share mark. What went wrong?

When Tilray became a public company in the summer of 2018, CEO Brendan Kennedy was "very, very, very, very, very, very, very, very positive about the whole industry — but in retrospect, maybe too positive?" Cramer said.

For example, the CEO highlighted a $100-billion opportunity in the biomedical cannabis space. Big pharma and consumer packaged goods companies will need to scramble to make investments in the space.

Why It's Important

Cramer says he "buys into the picture" and recognizes the long-term cannabis opportunity.

The problem for Tilray is that it was left behind as rival cannabis company Cronos Group Inc (NASDAQ: CRON) secured a $1.8-billion investment from Altria Group Inc (NYSE: MO) and Canopy Growth Corp (NYSE: CGC) secured more than double that amount through its partnership with Constellation Brands, Inc. (NYSE: STZ), the CNBC host said. 

By comparison, the "closest Tilray has come" is a research partnership with Anheuser Busch Inbev NV (NYSE: BUD) in which each company "kicked in $50 million," Cramer said. Following the announcement, Kennedy told Cramer on his "Mad Money" show that Tilray "doesn't want to partner with ABI, we want to build ABI."

Cramer said: "I guess that's not really panning out as expected." 

What's Next

When a cannabis executive paints a large, bullish picture on the space's long-term opportunity, investors may want to "be a little more cautious," Cramer said

Tilray could become a $100-billion company over time, but the stock's capitalization today of $4.6 billion seems "wrong" for a company that most recently reported quarterly sales of just $23 million, he said. 

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